Federal Reserve Chairman Ben S. Bernanke is trying to make sure the U.S. central bank doesnÂft become a scapegoat for fiscal profligacy.

Fed officials are warning that Congress needs to balance the nationÂfs budget, showing that policy makers are concerned about a loss of confidence in U.S. finances and want lawmakers to help prevent it, according to Dean Maki, chief U.S. economist at Barclays Capital Inc. Bernanke extended his campaign yesterday, telling the House Budget Committee Âganything that can be done now to change that pathÂh would have a Âggood impact on the current economyÂh and interest rates.

ÂgThere is this tremendous fiscal problem looming, and Congress has to do something about it,Âh said Mark Gertler, a professor of economics at New York University who has co- authored research with Bernanke. ÂgIf they have a fixed amount of time, spend it solvingÂh that problem, rather than Âggrandstanding about the Fed.Âh The central bankÂfs plan to buy $600 billion in Treasury securities through June is Âga relatively modest policy undertakingÂh compared with balancing the $3.7 trillion budget, he said.

The Fed sparked the harshest political backlash in three decades after announcing a second round of so-called quantitative easing on Nov. 3. Republicans, including House Speaker John Boehner of Ohio, said QE2 risks accelerating inflation, weakening the dollar and fueling asset bubbles.

ÂgWhat is needed is very clear communication to the Congress at large and the American public,Âh that the program isnÂft Âgcrazy or highly unusual and that it made sense, but that it does involve some risk and thatÂfs being managed,Âh said Alfred Broaddus, former president of the Federal Reserve Bank of Richmond. ÂgYouÂfve got to be careful about turning this thing around.Âh

ÂeCan Be OverdoneÂf

By acknowledging that buying government debt Âgcan be overdone,Âh the Fed may bolster confidence that it will withdraw its record stimulus in time to avoid a surge in inflation, said Broaddus, who was president of the Richmond Fed from 1993 to 2004.

Bernanke defended the bond-purchase program yesterday in his first House testimony since Republicans took control of the lower chamber last month. He repeated that Congress should adopt a long-term plan to control a federal budget deficit thatÂfs projected to reach a record $1.5 trillion this year.

The Fed isnÂft monetizing the nationÂfs debt because Âgwhat weÂfre doing here is a temporary measure, which will be reversed,Âh Bernanke said. QE2 is Âgproviding significant support to job creation and economic growth.Âh

Biggest Drop

The unemployment rate fell to 9 percent in January from 9.8 percent in November, the biggest two-month drop since 1958, and gross domestic product rose at a 3.2 percent annual rate in the fourth quarter, compared with 2.6 percent in the third and 1.7 percent in the second.

At the same time, Âgour nationÂfs fiscal position has deteriorated appreciably,Âh and adjustments Âgmust occur at some point,Âh Bernanke said yesterday.

ÂgThe Fed wants to make clear itÂfs not going to underwrite large deficits in the medium term,Âh Maki said in a telephone interview from his New York office. The central bank is responding to critics whoÂfve said it Âgis allowing the Congress and the administration to run less-responsible fiscal policy,Âh he said.

One such critic is Sarah Palin, the 2008 Republican vice- presidential nominee, who says sheÂfs considering a run for president in 2012.

ÂgItÂfs time for us to ÂerefudiateÂf the notion that this dangerous experiment in printing $600 billion out of thin air, with nothing to back it up, will magically fix economic problems,Âh she wrote in a letter to the Wall Street Journal published Nov. 18.

Curb Spending

So far, buyers of Treasury securities havenÂft forced Congress to curb its spending by making it expensive for the nation to borrow. The yield on the 10-year Treasury note was 3.65 percent late yesterday in New York, lower than its average of 5.25 percent during the last decade, according to data compiled by Bloomberg.

ÂgUnfortunately, thereÂfs no sense of urgency right now,Âh said John Lonski, chief economist at MoodyÂfs Capital Markets Group in New York. ÂgOnce you reach the point where concerns about the federal budget deficit render financial markets dysfunctional, then Congress will take action pronto.Âh

Representative Paul Ryan, the Wisconsin Republican who chairs the budget panel and offered his own plan last year for cutting spending, asked Bernanke during his testimony if Congress could aid short-term economic growth with a plan to control spending. ÂgThatÂfs correct,Âh Bernanke said.

Inflation Launched

Bernanke may not have won Ryan over on QE2, though. Ryan said during the hearing heÂfs concerned that ÂgyouÂfre going to see inflation after itÂfs already been launched.Âh

Representative Ron Paul, a Texas Republican who has advocated abolishing the central bank, said yesterday that the FedÂfs policies arenÂft working.

ÂgThey havenÂft been very efficient in producing jobs,Âh and prices Âgreally arenÂft all that stable,Âh Paul said at a hearing he held titled ÂgCan Monetary Policy Really Create Jobs?Âh

Since Bernanke fueled speculation about additional asset purchases during an Aug. 27 speech in Jackson Hole, Wyoming, inflation expectations have climbed. The breakeven rate for 10- year Treasury Inflation Protected Securities, the yield difference between the inflation-linked debt and comparable- maturity Treasuries, has risen to 2.33 percentage points from 1.63 percentage points, Bloomberg data show. The central bank prefers an inflation rate of about 2 percent.

Congressional Legacy

ÂgDeficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress,Âh Dallas Fed President Richard Fisher said in a Feb. 8 speech. Fisher has expressed doubts about the efficacy of quantitative easing and said this week heÂfll oppose further asset purchases after the planned $600 billion is completed.

The Fed Âgwould be more comfortable running a very easy monetary policy if it could see firm evidence that a more- sustainable fiscal situation was being put in place on a long- term basis,Âh Maki said. Most Fed officials arenÂft seeking Âgsharp, immediateÂh cutbacks, given that they want the economic recovery to gain traction, he said.

Quantitative easing is Âghardly a panaceaÂh and would benefit from fiscal support, Fed Vice Chairman Janet Yellen said in New York speech Dec. 1. ÂgWe would be wise to heed the abundant empirical evidence of the superiority of taking action before a fiscal crisis is upon us,Âh Richmond Fed President Jeffrey Lacker said Feb. 8 in a speech in Newark, Delaware.

$35 Billion in Cuts

House Republicans have started looking at reducing some expenditures, announcing last week that they will seek $35 billion in cuts.

WashingtonÂfs spending spree is over,Âh Ryan said in a Feb. 3 statement.

While Bernanke and other Fed officials have voiced concern that the nationÂfs financial situation is unsustainable, they have stopped short of prescribing how lawmakers should fix it.

ÂgThe composition of spending and taxes is a Congressional prerogative,Âh Bernanke said yesterday.

Policy makers must Âgbe very careful about getting intoÂh too much detail with fiscal recommendations because that also could politicize the Fed, Broaddus said. BernankeÂfs predecessor, Alan Greenspan, was criticized for expressing his opinions on matters such as Social Security, he said.

ÂeDifferent ToneÂf

ÂgChairman Bernanke has set a different tone than Chairman Greenspan in that he has consistently avoided making near-term fiscal-policy recommendations,Âh Maki said. ÂgHeÂfs taking this approach in part to preserve the FedÂfs independence and avoid an image of partisanship.Âh

Congress shouldnÂft become too involved in monetary policy, either, because that could damage the credibility and effectiveness of the Fed, Lonski of MoodyÂfs said.

ÂgTheir primary focus ought to be on fiscal policy, not on monetary policy,Âh Lonski said. ÂgYou have to worry about what you have direct control over.Âh